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Lean Manufacturing That Works

AMACOM Books

Chapter One

As a lean-manufacturing consultant, I spend my time working with manufacturing companies that have decided they are going to change from a conventional batch operation to a lean-flow operation. At a typical company that contacts us, management has read a lot of books and talked to a lot of people. Sometimes the managers have visited other companies that are already in transition; quite often they have had one or two of the large consulting firms in to conduct training in various areas of lean theory. The one common factor I see in all these firms is this: When they leave the conference room and go to the shop floor, they still don't know exactly how or where to start doing the work.

So the big question is, where do we start?

I am reminded of a client of some time ago. (This may even be an imaginary client, who knows?) The president of this particular company was a man of many singular ideas, as opposed to a man with a broad vision. Every day he would show up at work with a hundred ideas that had come to him the night before, and he would do a walk-around. During the course of his walk-around, he would notice things that offended his sense of order and priority. Possibly there would be a number of units stored in an out-of-the-way location with no clear identification and no discernible explanation. He would go back to his office, call in his vice president of manufacturing, and create a great deal of havoc about this particular issue, terminating the conversation with the statement that he expected some answers, and damn quick! The vice president would leave this meeting, contact his reports, raise some hell, and pass along the demand for explanations, reasons, and corrective action, and make it damn quick! The manufacturing floor team would leap into action, attempt to find out why these units were there, find out what the problem was that put them there, mobilize people to get them out of there and do something with them, write some reports and develop plausible reasons and excuses, and get back to the vice president toward the end of the day with the data and results. The vice president would return to his boss's office with the results and go over the data in detail. Man, everybody was really working on a burning issue today. The boss wants answers, and he wants them fast! The next day seven different minor, yet obvious, issues would be brought to the forefront, and the floor team would run over there to deal with these particular hot topics of the day. Every day was a different series of minor firefights concerning whatever was noticeable at that particular time. I like to call this "flock management": The flock runs over here today, the flock runs over there tomorrow, everyone to the left on Tuesday, oh, wait, stop, to the right on Wednesday, "gobble, gobble, gobble."

The critical observation here is that this company had no collective vision of where it was going from an improvement standpoint. There was no overall vision of the transition to a more effective company. The model was simply to react to the biggest fire that happened to be in your face at any given point in time. Over and over, day after day, month after month.

I see this behavior in small companies and large. At times the veneer is more sophisticated, but the underlying activity model is the same.

Where to Start

The tool we use to begin the lean journey is a baseline. Some people may call it a value-stream mapping event. Call it what you will; the intent is to define your current state of operations, analyze it for waste, and create a desired future state and a highly detailed plan of execution to get there. This is typically done at the site level for best results. I have seen this tool applied to a multiple-business-unit system with a deploy-down strategy, with vague and unmanageable results. The site level is much more practical in that a facility typically has discrete products that are being delivered to customers, usually all functions are represented, and a clean value-stream model that is under the control of the functions present in the facility can be constructed. This tool is an event-based process, meaning that a cross-functional team gets locked up for typically five days to deliver the goods. No interruptions, no escape. The common reaction to this requirement is: "Good heavens, my key people are far too busy to be sidelined for an entire week. It simply cannot be done."

I've done countless baselines, and I have yet to see a company go under because several of its key people were sequestered for a few days. Curious indeed? I've seen companies attempt this process with the conventional "We'll meet for two hours a day" approach, and the results have been sadly disappointing. This process is driven by the objective of eliminating waste, with all activity being categorized from the customers' viewpoint. This having been said, there are a couple of assumptions, namely:

1. Your company has a basically sound business strategy. (For example, developing a windows-based software package in your basement office with the intent of taking market share from Microsoft might be an illustration of a less-than-sound strategy.)

2. The top managers in your organization recognize that a change in operating philosophy is needed if the company is to improve and see different results from those you have been experiencing.

3. The top managers are prepared to support the change and provide the resources needed to make it happen.

If you don't have these pieces in place, save yourself some time, money, and aggravation and just keep doing what you're doing. To expand on the purpose of the baseline event, the deliverables are:

* A clear picture of your current state

* An equally clear picture of your future state

* A specific definition of the waste in your target process

* A highly defined illustration of the disconnects across your system processes

* A prioritized plan of activities to implement the change

* Quantification of the expected results and the cost to implement (payback)

* An energized group with one collective mind

Everyone has the same objective and the same priorities, and is using the same numbers. No blur, no noise.

If this sounds like an obviously common-sense approach, than why is it so hard to do? That's a good question. I wish I had a pat answer.

A Testimonial to Going Lean

This is a good place to plug in an article written by a long-time client and friend, Will Macfarland. Will is an unusual executive, with extremely high energy, a big brain, and an eclectic style that absorbs, assimilates, recombines, and applies everything that goes by him. The environment he creates is highly creative and supportive, and it's always a stimulating, warp-speed ride. I was putting together a newsletter on manufacturing practices focusing on lean implementation, and I asked Will to put together an article on his experiences as he took (and continues to take) his company down the lean path-a sort of "how did you get going, and what were your lessons learned" dissertation. It's very interesting stuff.

What Do We Do Next?

We read all the standard books and had seen a number of impressive magazine articles. We talked to and visited some successful, lean companies. We even had some scattered internal success with techniques like cellular manufacturing and point-of-use storage. Meaningful improvement opportunities were becoming harder and harder to identify. We were convinced lean was our future. But, the big question loomed. What do we do next?

The search for an approach began with phone calls to a number of well-known consultants. Perhaps lean boot camp was the solution-send our best and brightest off for a week to be whipped into lean shape. Or maybe a black-belt program-take a few people, teach them "everything" there is to know about lean, certify them as dangerous, and turn them loose on an unsuspecting organization. We had three concerns with both of these solutions. First, they were long on immediate expense and short on near-term results. Second, the organizational issues would be less than ideal-sending in storm troopers is typically not a great way to engender local ownership. And third, it was not clear to us that endless classroom training and simulations would translate to real results on the shop floor.

Finally, we decided to (as the saying goes) Just Do It. By good fortune we found a consultant-really more of a facilitator-who is as comfortable on the shop floor as in the classroom. We chose several projects and scheduled "baseline" events. These events, typically a week in duration, use value-stream mapping as an organizing concept, supplemented by a variety of well known analytical techniques, such as work sampling, spaghetti diagrams, and root cause analysis (fish boning). At the end of each event we had a clear view of some major improvement opportunities, a list of projects and preliminary action plans, cost-benefit analyses, and a highly motivated team.

We are now approximately sixteen months into our lean journey. We have completed baseline analyses on a half-dozen parts of our business, are pursuing many improvement projects, and have encountered broad and enthusiastic support from virtually everyone involved. For one important segment of our business we have: reduced lead-times from twenty days to ten, and are headed for four; reduced total process setup times from an average of 3 1/2 hours to 55 minutes, and are targeting 20 minutes; reduced total inventory (including finished goods) by more than 50%, on our way to 80%; and have significantly improved on-time performance.

In another important segment, we have improved on-time performance from the chronically poor level of 65% to 92% and climbing. We have also applied this thinking to an under-performing paperwork process in which we quote and process orders for custom products. Order processing times (including drafting, bills-of-material, routings, etc.) have been reduced from an average of 50 hours to 29 hours, and are still declining. Quotation times have dropped from 15 hours to 4 1/2 hours, and are still declining. Our goal is to quote 80% of these jobs in real time.

These are a few of the more spectacular successes we have enjoyed through this process. There are other successes, and there have also been a few false starts. Here are some of the more important lessons we have learned along the way.

Exploit the Value-Stream Perspective

Most of the popular improvement methodologies (quality circles, TQM, reengineering, etc.) focus on improving a function rather than a process. For example, in a traditional improvement setting we might ask "how can we get a certain machine to run faster?" or "how can we process drafting requests on time?" Using a value-stream approach, we might define a process as: from the time we initially recognize customer demand to the time the product is shipped. We might then ask "how can we significantly accelerate this process and eliminate the non-value-adding activities?" Instead of looking at an individual function vertically across the entire company, we are looking at a complete process laterally-some people would say cash-to-cash.

For us this is an important distinction. After many years of function-by-function improvement efforts, low-hanging fruit was getting harder to find. We now find such fruit in abundance, located mainly at the boundaries between "optimized" independent functions. Furthermore, we often find activities that, in abstract, seem important, but that are not adding value in the process. These types of discoveries are obvious in a well-reasoned value-stream analysis, but are nearly invisible in more traditional improvement methodologies. Choose your value stream broadly. Narrow definition of a project will obscure many of the best improvement opportunities.

Lead from the Top

Radical transformation of a process is seen by most as risky. The perceived risks are personal (how will my role change?) as well as organizational (what happens if we fail?). In our experience, with a highly motivated group, the risks are few-a good team will nearly always redouble their effort and make the necessary adjustments, rather than allowing a project they believe in to fail. The real risk is the manager who fears change (or failure) more than he craves breakthrough. Continuous and active leadership from the top can encourage bold and comprehensive change. It can immediately clarify what avenues are, and are not, reasonable, thus minimizing wasted time, frustration, and disappointment. And, it can mitigate perceived risk.

Formulate and Communicate Clear Objectives Early and Often (but Be Flexible)

The lean concept does not impose a specific set of objectives. It is really more of a philosophy. One could argue that the absolute elimination of waste is an objective, but waste takes many forms. We began our journey with broad appreciation for the benefits of lean, but without specific objectives. After three baseline events it became clear that our biggest opportunities were improving on-time performance while significantly reducing inventory. This realization has led to very strong, clearly stated, regularly communicated objectives on lead times and setup reduction. Prior to establishing these objectives, the baseline events and projects might wander off course.

We also recognize, though, that circumstances vary from plant to plant, and from process to process. Thus, we will modify our objectives on a particular project, but we never lose sight of the primary objectives. In a larger, more complex operation, we find that a degree of flexibility on objectives is essential. However, we will not let a group drift, or find their own way. For us this is a gentle balance between encouraging a team to be creative and to set ambitious goals, and keeping them focused on the most important needs of the business.

Consider Your Metrics and Measurements

In our foundry the rule has been that you only make money when you empty the furnaces (at least this is what our standard cost system tells us!). Thus the temptation, in the name of earnings, is to pour castings not really needed right now. Measurements of machine utilization can encourage us to avoid building process-oriented cells, thereby inflating the number of workers, increasing work-in-process inventory, extending lead times, adding material handling costs, etc.

Continues...

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Excerpted from Lean Manufacturing That Works by Bill Carreira Copyright © 2005 by Bill Carreira. Excerpted by permission.
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